Assignment: Course Code

ASSIGNMENT
Course Code
OMC451
Course Name
Personal Finance
Programme
B.Tech
Department
Civil Engg
Faculty
FET
i
Name of the Student
BEERAPPA R NAIK
Reg. No
14ETCE001007
Semester/Year
8th /4th
Declaration Sheet
Course Leader/s
Dr. Suresh Name
Student N Beerappa R Naik
Reg. No 14ETCE001007
Semester/Yea
Programme B.Tech 8th /4th
r
Course Code OMC451
Course Title Personal Finance
Course Date to
Course Leader Dr. Suresh N
Declaration
The assignment submitted herewith is a result of my own investigations and that I have
conformed to the guidelines against plagiarism as laid out in the Student Handbook.
All sections of the text and results, which have been obtained from other sources, are
fully referenced. I understand that cheating and plagiarism constitute a breach of
University regulations and will be dealt with accordingly.
Signature of the
Date 23-04-2018
Student
Submission date
<Personal Finance> ii
stamp
(by Examination & Assessment
Section)
Signature of the Course Leader and date Signature of the Reviewer and date
<Personal Finance> iii

<Personal Finance> iv
Question No.1
Solution to Question No. 1:
Currently I am studying, therefore I don’t have a stable income. My financial planning starts from July-2020
when I am 25 years old. Due to the financial constraints I would be working in a company after my
graduation up to 2 years. Later I would be pursuing my higher education(i.e at 25 years). The first two years
of my financial planning will be purely based on my pocket money obtained, as, I would be pursuing my
higher education. I would be pursuing my higher education in a distant place within the country.
For 1st year(2020-21), the amount of money deposited into my account every month would be Rs.8,000 .I
would stay in a PG ,therefore it would cost Rs. 5,000 per month including food, electricity and water.
Health expenses include doctor visit, tablets taken, or buying of other pharmaceutical products. Recreation
cost includes movies watched, places visited if any. Miscellaneous expenses include internet bills, things
eaten outside etc. Travel expenses include bus charges from the PG to college and vice-versa. I would
deposit Rs.30/month to my Jan Dhan Account for my insurance under ‘Pradhan Mantri Jeevan Beema
Yojana’.
Cash inflow Typical month(₹) Year’s Cashflow

(equal to the typical monthly cash
flows ×12) in (₹)
Disposable income 8,000 96,000
Interest on deposits - -
Dividend payments - -
Total Cash Inflows 8,000 96,000
Cash Outflows
Rent 5,000 60,000
Health expenses 500 6,000
Health insurance 30(Approx 360
₹1/day)
Clothing 1,000 12,000
Travel expenses 400 4,800
Recreation 200 2,400
Miscellaneous expenses 500 6,000
Total Cash Outflows 7,630 91,560
Net Cash Flows 370 4,440
Assets
Liquid assets At the end of year in ₹
Cash 0
Savings account 3,000(Deposited Earlier)+440
KVP 4,000
Total liquid assets 7,440
At the end of the year let us withdraw Rs 4,000 and deposit in KVP for 9years 11months. The amount
would be doubling at the end.
Second Year(2021-22)
The budget is similar to the earlier year. Only that there is a slight variation in travel price due to hike in bus
fare.The recreation cost also increases due to variation in tariffs.
Cash inflow Typical month(₹) Year’s Cashflow

(equal to the typical monthly cash flows
×12) in (₹)
Disposable income 8,000 96,000
Total Cash Inflows 8,000 96,000
Cash Outflows
Rent 5,000 60,000
Health care expenses 500 6,000
Health insurance 30(Approx 330
₹1/day)
Clothing 1,000 12,000
Travel expenses 500 6,000
Recreation 300 3,600
Miscellaneous expenses 500 6,000
Total Cash Outflows 7,830 93,930
Net Cash Flows 170 2,040
Assets
Cash 0
Savings account 3,440(Deposited Earlier)+40
KVP 4,000+2000(A new one)
Total liquid assets 9,480
At the end withdraw Rs 2,000 and deposit it in the form of Kisan Vikas Patra (KVP) which doubles at the end
of 9 years 11months at a rate of 7.3% .The amount left in the account will be Rs 3,480.
Third Year (2022-23)

At the end of the year, I would be passing-out and placed in a firm which would offer me around Rs. 6 LPA.
In the third year, firstly I would close my Jan Dhan account and transfer my amount to my new savings
account. My each month’s salary would be deposited in my account. I would withdraw the necessary
amount based on my requirement.
Salary break up
<Personal Finance> 6
Name Beerappa
Designation Construction management Engineer
Location Bangalore
CTC Rs 6,00,000/-
Salary and Allowance Monthly Annual
Gross salary(including 50,000 6,00,000

basic,HRA,Bonus,Special
allowance)
Employees contribution-PF 6,000 72,000
Travel allowance 1,600 19,200
Medical allowance 1,250 15,000
Professional tax 200 2,400
Sub-total 9,050 1,08,600
Net salary 40,950 4,91,400
The entire 12% of my contribution goes into my EPF account along with 3.67% (out of 12%) from my
employer, while the balance 8.33% from my employer’s side is diverted to my EPS (Employee’s Pension
Scheme) .The professional tax, medical allowance and travel allowance are deducted from the gross salary.
Insurance
According to 80D we can invest for Medical insurance (Mediclaim –All India assurance Company) up to
Rs.15,000 and Rs.20,000 for self and parents respectively(Senior Citizen).
Rs.4,91,400-15,000-20,000=Rs. 4,56,400
So the remaining amount is Rs 4,91,400 .In order to reduce the amount of taxation as much as possible I
would refer section 80C.Section 80C offers a maximum deduction of up to Rs. 1,50,000. I can invest in any
of the available investment options. A few of the options are as follows:
 Public Provident Fund

 Life Insurance Premium
 National Savings Certificate
 Equity Linked Savings Scheme
 5 year fixed deposits with banks and post office
So according to section 80C I would invest in Public Provident Fund at the post office because o ne can
deposit a maximum of 12 times in a year. There are provisions to take loans and make partial withdrawals
from the scheme as well. PPF is a debt-oriented asset class, i.e., one's investment is not exposed to equities
and hence returns are not linked to the stock market performance. The interest rate on PPF returns are set
by government every quarter based on the yield (return) of government securities. In 1968-69, PPF offered
a 4 per cent per annum interest while from 1986-2000 it offered 12 per cent. Today in 2018-19 it offers 7.6
per cent. As the interest is tax-free, the effective pre-tax yield for someone paying tax at 10.3 per cent, 20.6
per cent and 30.9 per cent rates will be 8.69 per cent, 9.8 per cent and 11.28 per cent per annum
respectively.
Now let us deduct Rs. 1,50,000 from the remaining amount for PPF(Public Provident Fund).
Rs. 4,56,400-1,50,000=Rs. 3,06,000
Now rest of the income comes under taxable income
Actually the Basic exemption limit is Rs. 2,50,000 for the taxable income.
Divide the tax into two slabs and calculate
5
Tax: 0%( for first 2.5 lac) + 56,000x ( for next 2.5 lac @5%) =2,800
100
4
Cess:-4% of total income=2,800x =Rs. 112
100
Now tax including cess is Rs.2,912.

Rebate=Rs.5,000(According to https://economictimes.indiatimes.com/wealth/tax/budget-2016-tax-rebate-
for-persons-with-income-less-than-or-equal-to-rs-5-lakh-increased-by-rs-3000/articleshow/51190071.cms)
if income is below 5L but here the income is high.
Tax liability=Rs. 2,912
The budget needs to be prepared in order for the expenditure incurred. Rental price would not be
applicable to me as I would stay with my parents in their house, which is owned by them. The amount
which is meant for clothing is Rs. 2,000 including all the family members. It is low because in these days we
get vouchers from various sellers which offer discounts. The grocery charge would include the charges of
vegetables, fruits etc. Telephone charges includes the internet charge(Rs 400 per 3 months for each
person).Electricity, water and cable bill are Rs.400, Rs. 700 and Rs. 300 respectively.The electricity and
water could vary from month to month. Miscellaneous amount is meant for this purpose if cash shortage
occurs.
Cash inflow Year’s Cash flow Month’s Cash flow in (₹)

in (₹)
Disposable income(after taxation) 3,03,088 25,257+
Total Cash Inflows 3,03,088 25,257
Cash Outflows
Rent NA NA
Clothing 24,000 2,000
Recreation 4,800 400
Miscellaneous expenses 6,000 500
Groceries 1,38,000 11,500
Telephone charges(Including Internet) 14,400 1,200
Electricity 4,800 400
Cable charges 3,600 300
Water bill 8,400 700
Total Cash Outflows 2,04,000 17,000
Net Cash Flows 99,088 8,257
*Since the amount due to interest in the savings account was negligible. Therefore, interest on the deposits
is neglected.
+
Taxes aren’t filed at the end of each month. This is just a rough depiction.
Out of the Rs. 99,088 of the net cash flow, I would deposit Rs .50,000 deposit in the form of Fixed
deposit(FD) for 1 year.Let it be kept for auto renewal.The rate of interest for the FD would be 6.7%. The
rest of the amount will be kept as it is in the savings account. The savings account will yield around 4%
interest.
Assets
Cash -
Savings account 5,480(At the end of earlier year)+49,088
KVP 4,000;2000
FD 50,000
Total liquid assets 1,10,568(Exclusive of interest)
Investment assets
PPF 1,50,000
Total investment assets 1,50,000
Total assets 2,60,568
Fourth year(2023-24)
In this year there would be 5% hike in the salary. The income increases along with the deductions due to
PF(Provident fund). The rest of the deductions are similar to the previous year.
Salary break up
Name Beerappa
Location Bangalore
CTC Rs 6,30,000/-(+5%)

allowance)
Employees contribution-PF 6,300 75,600
Sub-total 9,350 1,12,200
Net salary 43,150 5,17,800
Deductions for medical insurance
Rs.15,000 for self and Rs.20,000 for Parents
Rs.5,17,800-15,000-20,000=Rs. 4,82,800
Now let us deduct Rs. 1,50,000 in the form of PPF Rs. 4,82,800-1,50,000=3,32,800
Basic exemption limit = Rs. 2,50,000

5
Tax: 0%( for first 2.5 lac) + 82,800x ( for next 2.5 lac @5%) =Rs. 4,140
100
4
Cess levied:-4% of total income=4,140x =Rs. 166
100
Now tax including cess is Rs.4,306
Tax liability=Rs 4,306
Disposable income=Rs. 3,36,000-Rs. 4,306=Rs. 3,31,694
The budget is similar to the previous year. Only the cable price has decreased as I would opt for lesser
number of channels.
Cash inflow Year’s Cashflow Month’s Cashflow in (₹)
in (₹)
Cash Outflows
Rent NA
Clothing 24,000 2,000
Groceries 1,38,000 11,500
Net Cash Flows 1,28,294 10,691
*Since the amount due to interest in the savings account was negligible. Therefore, interest on the deposits
is neglected.
+
Taxes aren’t filed at the end of each month. This is just a rough depiction.
Out of the Rs. 1,28,294 of the net cash flow, Rs.1,00,000 will be invested on the stocks in the equity market
because the rate of return is high when compared to other means of investment. The remaining amount is
left as it is in the account.
Assets
Cash -
FD 50,000
KVP 4,000;2,000
Investment assets
Stocks 1,00,000
PPF 1,50,000;1,50,000
Investment declaration has to be done in the beginning of a financial year. My employer asks me to declare
my tax-saving investments for the year to be able to deduct tax accordingly from my monthly salary.
Investment declaration is important for me because it can lead to higher in-hand salary.
In the beginning of the financial year, I have to just make an estimate of the investments that I intend to
make. I don’t need to submit actual proofs till the end of the financial year. I can actually invest less or
more. The eventual investments don’t have to be exactly as declared.
The Form 12BB is a statement of claims by an employee for deduction of tax. With effect from 1st June
2016, a salaried employee is required to submit the Form 12BB to his or her employee to claim tax benefits
or rebate on investments and expenses. Form 12BB has to be submitted at the end of the financial year.
Form 12BB applies to all salaried taxpayers. Using Form 12BB, an employee has to declare the investments
that they have made during the year. Documentary evidence of these investments and expenses have to
be provided at the end of the financial year as well.
Fifth year (2024-25)
In this year there would be 2% hike in the salary. The income increases along with the deductions due to
PF. The rest of the deductions are similar to the previous year.
Salary breakup
Name Beerappa
Location Bangalore
CTC Rs 6,31,260/-(+2%)

allowance)
Employees contribution-PF 6,313 75751
Sub-total 9,363 1,12,351
Net salary 43,242 5,18,909
Deductions for medical insurance
Rs.15,000 for self and Rs.20,000 for Parents
Rs.5,18,909-15,000-20,000=Rs. 4,83,909
Now let us deduct Rs. 1,50,000 in the form of PPF Rs. 4,83,909-1,50,000=Rs. 3,33,909
Basic exemption limit = Rs. 2,50,000

5
Tax: 0 %( for first 2.5 lakhs) + 83,909x (for next 2.5 lakhs @5%) =Rs.4,195.45
100
4
Cess:-4% of total income=4195x =Rs. 168
100
Now tax including cess is Rs.4,363

Since taxable is less than rebate. Therefore, rebate reduces the taxable liability
Tax liability=Rs. 4,558

Disposable income=Rs. 3,33,909-Rs. 4,363=Rs. 3,29,546
The budget is similar to the previous year. There is hike in the price of groceries. Therefore, the
expenditure increases. The miscellaneous expenditure has decreased due to increase in grocery
expenditure. The cable price would be raised.
Cash inflow Year’s Cashflow Month’s Cashflow in (₹)
in (₹)
Cash Outflows
Rent NA
Clothing 24,000 2,000
Groceries 1,44,000 12,000
Net Cash Flows 1,20,146 10,308
(https://www.quora.com/What-are-the-PF-withdrawal-rules-in-India)
Out of the Rs. 1,20,146 of the net cash flow, Rs .1,00,000 will be withdrawn for starting my own firm .More
amount is needed therefore I would apply for the Employee’s PF money (3 years) .
Employee’s PF for 1st year=Rs. 72,000
Employee’s PF for 2nd year=Rs.75,600
Employee’s PF for 3rd year =Rs.75,751
Total PF=72,000+75,600+75,751=Rs. 2,23,251
90
PF available=90%(Total fund)= x2,23,251=2,00,925.9≈ Rs. 2,00,000
100
The amount necessary is Rs 3 Lakh for grade 3 contractor license.I have to wait for 2 months for this
amount.after getting it,I would deposit it in my firm’s account, so that the requirement is
furnished.Another Rs. 1,00,000(50,000 from FD;50,000 from the savings account) would be necessary for
setting up of office .Rs.10,000 would be necessary for miscellaneous reasons pertaining to the firm. After
the papers are done,I would apply for loan in the future
Assets
Cash -
FD 50,000
KVP 4,000;2,000
Investment assets
Stocks 1,00,000
PPF 1,50,000;1,50,000;1,50,000
UTI retirement benefit fund 12,000
After 2 months
Assets
Cash -
Savings account 1,03,008(2 months prior)-60,000
FD -
KVP 4,000;2,000
Total liquid assets 49,008(Exclusive of interest)
Investment assets
Stocks 1,00,000
PPF 1,50,000;1,50,000;1,50,000
UTI retirement benefit fund 12,000
The amount remaining in my account is Rs.92,656.I would withdraw Rs.60,000 and invest it in FD.I would
start depositing Rs 12,000/annum exclusively meant for retirement planning in the mutual fund under UTI
retirement benefit fund.
Conclusion:-
The contingency amount would be withdrawn in the form of EPF amount. Continuing with the PPF for a
long time would be a golden opportunity for retirement planning or keeping the FD for a longer time. As I
am going to invest on UTI retirement benefit fund I would prefer using that amount for retirement
planning. The PPF ,FD can be used for future goals. Health insurance would be based purely from
80D.Investment would be in the form of buying stocks in the equity market. As I would not be selling the
stocks, therefore the tax doesn’t come into foreplay over here.At that age I would not prefer taking loan
for buying a new house,vehicle etc rather than think about expanding my business plans .
Bibliography
________________________________________________________________________________
PDF
1. Personal Financial Plan For John & Mary Sample by Dempsey management LLC
2. Sample plan by ABC Financial group
3. IEC financial planning booklet
Websites
1. www.quora.com
2. www.mymoneysage.com
3. www.bankbazaar.com
4. www.policybazaar.com
5. https://en.m.wikipedia.org
6. https://onemint.com
7. https://www.newindia.co.in/portal/
8. https://www.hdfchealth.com/health-insurance-plans/hdfc-life-easy-health.aspx
9. https://www.indiatoday.in/budget-2017/story/union-budget-2017-income-tax-rate-slabs-
958339-2017-02-01
10. https://cleartax.in/s/income-tax-rebate-us-87a
Books
1. Personal finance by Kapoor,Diabay and Hughes
2. Personal finance by Jeff Madura
3. Financial Advisor’s workbook by NiSM

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ASSIGNMENT

<Personal Finance> iii

Cash inflow Typical month(₹) Year’s Cashflow

Cash inflow Typical month(₹) Year’s Cashflow

Third Year (2022-23)

Designation Construction management Engineer

Salary and Allowance Monthly Annual

Gross salary(including 50,000 6,00,000

Employees contribution-PF 6,000 72,000

Travel allowance 1,600 19,200

Medical allowance 1,250 15,000

Professional tax 200 2,400

Sub-total 9,050 1,08,600

Net salary 40,950 4,91,400

 Public Provident Fund

Now tax including cess is Rs.2,912.

Cash inflow Year’s Cash flow Month’s Cash flow in (₹)

Designation Construction management Engineer

Salary and Allowance Monthly Annual

Gross salary(including 52,500 6,30,000

Employees contribution-PF 6,300 75,600

Travel allowance 1,600 19,200

Medical allowance 1,250 15,000

Professional tax 200 2,400

Sub-total 9,350 1,12,200

Net salary 43,150 5,17,800

Deductions for medical insurance

Rs.15,000 for self and Rs.20,000 for Parents

Basic exemption limit = Rs. 2,50,000

Divide the tax into two slabs and calculate

Fifth year (2024-25)

Designation Construction management Engineer

Salary and Allowance Monthly Annual

Gross salary(including 52,605 6,31,260

Employees contribution-PF 6,313 75751

Travel allowance 1,600 19,200

Medical allowance 1,250 15,000

Professional tax 200 2,400

Sub-total 9,363 1,12,351

Net salary 43,242 5,18,909

Deductions for medical insurance

Rs.15,000 for self and Rs.20,000 for Parents

Basic exemption limit = Rs. 2,50,000

Divide the tax into two slabs and calculate

Now tax including cess is Rs.4,363

Tax liability=Rs. 4,558

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